A McDonald’s Economy Could Mean Problems in Housing, Auto Sectors

Here is today’s Wake-Up Call.  This issue was sent prior to the jobs number.  To say we were shocked at the report would be an understatement.  Regardless, though, we’re posting here for your review.

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A McDonald’s Economy Could Mean Problems in Housing, Auto Sectors
By: Todd M. Schoenberger, @TMSchoenberger

Now that the political conventions have concluded, our attention can shift back to the important subject of the day: Jobs. It’s all about the jobs, and anybody out there telling you differently is simply out of touch.

At 8:30 Eastern Time this morning the Bureau of Labor Statistics will release its monthly report card on job creation in this country. Depending on who you ask, the estimates range from a job increase of 125,000 to 145,000. The unemployment rate is expected to stick at 8.3 percent.

There has been a tremendous of talk surrounding the amount of jobs being created in the last few years. Yes, there has been positive job growth. But have you ever wondered about the quality of jobs being created? Or, in other words, are these the high income jobs, which are needed to accelerate a troubled economy.

Well, do a Google search and review it for yourself: 70 percent of all jobs created in 2012 are of the low-income variety. Hospitality, leisure, and retail have dominated new hires this year; and the trend isn’t expected to reverse any time soon.

I suppose a job is a job, and any positive development will be perceived as such. However, it doesn’t do very much for an economy stuck in quicksand, not to mention “big ticket” purchases like homes, cars and appliances. Want to get the economy really rolling: increase consumer demand, which leads to increases in labor. Getting to that point will be the hard part.

The country does not need a McDonald’s economy. Ask any economist and you’ll hear minimum wage jobs means minimum growth. Therefore, we will consistently need government support to stimulate economic growth. Yep, nothing organic here.

I believe today’s number will have an upside surprise, though. Typically, retailers will show hiring increases in August due to back-to-school, which also means growth in the education space. Recent housing data has shown some promise, so a slight jump in construction jobs should occur as well. Plus, from a net-net point of view, employers rarely layoff in the month of August.

Only time will tell, but expect the numbers to influence market sentiment on Wall Street and the attitude of Main Street voters. Today’s number is the first of the final three before Election Day—so, get the spin machine ready.